The British tax authority is warning expats who switch onshore UK pensions to a QROPS to check the provider receiving their money qualifies as a bona fide offshore pension.
If they don’t and the money goes to a pension scheme later found not to be a QROPS, they face a tax charge starting at 55% of the value of the transfer.
But HMRC does not help pension savers by posting the wrong QROPS List from time to time.
This is important because UK pension firms and QROPS providers can only transfer tax-relieved pension funds to a scheme on the current list.
On October 1, HMRC seem to have published two QROPS Lists – one with a new US pension and another without.
USA QROPS
On October 10, a new list was released by HMRC without explanation.
The timing is odd as the list is routinely published on the 1st and 15th of the month, although extra lists are not unusual.
The October 10 list includes the new USA QROPS – the Transform Group Simplified Employee Pension Plan – which is the same scheme posted and removed on October 1.
The problem for QROPS investors is working out if this scheme is a QROPS or not.
On October 1, it was too easy for one adviser to download the first QROPS List and a second the revised list without either realising another list had been published.
Inadvertent unauthorised transfer
If a pension savers money was transferred to the US QROPS which was missing off the second list, they were inadvertently making an unauthorised transfer, which could lead to the 55% tax penalty.
“You’ll need to check that the scheme you’re transferring to on or after that date meets the new requirements,” says HMRC.
“HMRC can’t guarantee these are ROPS or that any transfers to them will be free of UK tax. It’s your responsibility to find out if you should pay tax on any transfer of pension savings.
“HMRC will usually pursue any UK tax charges and interest for late payment arising from transfers to overseas entities that don’t meet the ROPS requirements even when they appear on this list.”
